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As such, iron ore prices are expected to only exceed $100 per tonne occasionally, it said in a research note.

The investment bank forecasts an average iron ore price of $92 per tonne cfr China for 2015, and annual averages in the $85-95 per tonne range through 2020.

Iron ore prices continued to reach multi-year lows over the past few weeks. Metal Bulletin’s 62% Fe Iron Ore Index stood at $83.50 per tonne cfr Qingdao on Tuesday September 9, down 38% from the $134.89 per tonne cfr recorded at the beginning of this year.

“One of the key reasons prices have underperformed over 2014 compared to our expectations has been the surprising strength of supply, particularly from the majors in Australia,” Macquarie said.

It noted that a lighter-than-usual cyclone season in the first quarter of this year, coupled with the majors’ strong operational performance, allowed for a much faster ramp-up into the expansion capacity than previously anticipated.

In July last year, Australia was exporting iron ore at a rate of less than 600 million tpy, but in the second quarter of this year, the volume increased to the 750-770 million tpy range.

“Put in context, Australia added half a Brazil to iron ore supply over a nine-month period,” the bank noted.

It added that it would not be surprised to see Australian exports closing in on the 800-million-tpy mark when the full August volumes are available.

The pace of supply ramp-up will continue to weigh on the supply-demand balance for iron ore over the medium term. Macquarie forecasts more than 50 million tpy of year-on-year growth from the majors through 2016, with Rio Tinto’s 360-million-tpy expansion and Anglo American’s Minas Rio being delivered next year and BHP Billiton’s push to 290 million tpy in the Pilbara.

“Displacement [of high-cost iron ore] is the norm for the coming years” and “periods of the spot price trading above where the cost curve would suggest it should be are likely to be few and far between”, the bank noted.

Chinese domestic material has continued to take the lion’s share of the displacement burden for 2014, but this will increasingly fall on high-cost seaborne ore, Macquarie said.